35918 Public Disclosure Authorized

35918 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Berlin Workshop Series 2006 Gudrun Kochendörfer-Lucius Gudrun Kochendörfer-Lucius and Boris Pleskovic Development Equity and Edited by Equity and Development Berlin Workshop Series 2006 Equity and Development Edited by Gudrun Kochendörfer-Lucius and Boris Pleskovic THE WORLD BANK Washington, D.C. © 2006 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail [email protected] All rights reserved. 1 2 3 4 09 08 07 06 The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is copyrighted. Copying and/or transmitting portions or all of this work with- out permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street, NW, Washington, DC 20433, USA, fax 202-522- 2422, e-mail [email protected]. ISBN-13: 978-0-8213-6105-4 eISBN-10: 0-8213-6106-6 ISBN-10: 0-8213-6105-8 DOI: 10.1596/978-0-8213-6105-4 ISSN 1813-9442 Edited by Gudrun Kochendörfer-Lucius and Boris Pleskovic Contents ABOUT THIS BOOK VII INTRODUCTION Gudrun Kochendörfer-Lucius and Boris Pleskovic 1 OPENING ADDRESS Michael Hofman 7 OPENING ADDRESS Inequality of Opportunity and Economic Development Francisco Ferreira and Michael Walton 11 KEYNOTE ADDRESS Distribution, Equity, and Development François Bourguignon 29 What Is Equity? What Is the Role for Governments in the Promotion of Equity? Does the Role Differ between Developed and Developing Countries? Promoting Equity through Social Cohesion: The Council of Europe Strategy Gabriella Battaini-Dragoni 39 Equality of Opportunity and Other Equity Principles in the Context of Developing Countries Dennis Cogneau 53 What Is Equity? Stephan Klasen 69 Should Poor People Care about Inequality? Martin Ravallion 79 V VI | CONTENTS Equity-Enhancing Social Transformation: Historical Evidence from Europe and Transition Countries Inequality and Political Regimes Carles Boix 95 Income Inequality, Economic Transformation, and Growth in Russia Evgeny Gavrilenkov 113 Justice and Transition Vladimir Gligorov 127 Building Efficient Welfare States: Lessons Learned Welfare State, Redistribution, Growth, and Poverty Reduction Rolph van der Hoeven 149 Global Inequalities: What Can Be Done to Reduce International Inequities? Rights-Based Development Jeremy Hobbs 165 Rising Labor Force Participation as a Source of Pro-Poor Growth Andrew Warner 173 What Will Greater Integration Mean for Inequalities between and within the Richer and Poorer Countries of the “New Europe”? Social Solidarity in an Expanding Europe Kemal Dervis¸ 191 Integration and Inequality in the EU Accession Countries Jan Svejnar 197 APPENDIXES Appendix 1: Programme 203 Appendix 2: Participants 209 About this Book The World Bank and InWEnt (Capacity Building International, Germany) hold a Development Policy Forum each September in Berlin. This meeting, known as the “Berlin Workshop,” provides a forum for the European research community to con- tribute its perspectives to early discussions in preparation of the World Bank’s annual World Development Report. The Workshop offers new ideas and distinctive perspectives from outside the World Bank. Participants in the Workshop come from a range of academic, governmental, think–tank, and policymaking institutions in Europe, the United States, and the Russian Federation, as well as from the World Bank and the German development institutions. Conference papers are written by the participants and are reviewed by the editors. Participants’ affiliations identified in this volume are as of the time of the conference, September 6–8, 2004. The planning and organization for the Workshop involved a joint effort. We extend our special thanks for the support of François Bourguignon, senior vice president for development economics and chief economist of the World Bank, and Michael Wal- ton and Francisco Ferreira, codirectors of the World Bank’s World Development Report 2006. We wish to thank Aehyung Kim, Klaus Kruger, and Joachim Müller for their advice and suggestions. We would also like to thank conference coordinators Theresa Bampoe, Marianne Donda, Irene Federwisch, and Judith Klemmer whose excellent organizational skills kept the Workshop on track. Finally, we thank the edi- torial staff, especially Stuart Tucker and Mark Ingebretsen from the Office of the Publisher, Kim Kelley, and Grit Schmalisch, for all of their work on this volume. VII Introduction GUDRUN KOCHENDÖRFER-LUCIUS AND BORIS PLESKOVIC The articles in this volume were presented at the seventh annual Berlin Workshop, held in Berlin on September 6–9, 2004. The workshop was sponsored by InWEnt (Capacity Building International), Germany, and the World Bank. The workshop provides a forum for the European research community to con- tribute its perspectives to early discussions in preparation of the World Bank’s annual World Development Report (WDR). The Workshop offers new ideas and perspectives from outside the World Bank giving fresh and enriching impulses to the development of the WDR. Participants of the 2004 workshop came from a range of academic, governmental, think–tank, and policymaking institutions in Europe, the United States, and the Russian Federation, as well as from the World Bank and the German development institutions. Michael Hofmann in his opening address emphasizes the importance of equity for poverty alleviation and sustainable development in developing countries. He also notes that equity is vital for European societies, especially those in the process of transition or enlargement. He argues for strengthening research on equity issues to explore different cultural endowments and their implications for addressing inequality by quoting David S. Landes in The Wealth and Poverty of Nations: “If we learn anything from the history of economic development, it is that culture makes all the difference.” Hofmann supports country-specific policies and welcomes the recent, more pluralis- tic approach of the World Bank. At the same time, he reiterates that development and equity warrant more than technocratic fine-tuning. Structural change with equity implies political interest and the political will to serve people in need. In their opening address Francisco H.G. Ferreira and Michael Walton introduce the topic of World Development Report 2006 (WDR): the interrelationship between equity and development and the respective development strategy as well as Gudrun Kochendörfer-Lucius is Managing Director of InWEnt–Capacity Building International, Germany. Boris Pleskovic is Research Manager, Development Economics, at the World Bank. Berlin Workshop Series 2006 © 2006 The International Bank for Reconstruction and Development/The World Bank 1 2 | GUDRUN KOCHENDÖRFER-LUCIUS AND BORIS PLESKOVIC the consequences of inequality on a country and global level. The workshop was divided into five sessions following a keynote address. In his keynote address, François Bourguignon examines the conceptual foundation of the workshop sessions by discussing the definition of equity itself. What do we mean by equity and how does equity differ from equality? Whereas equity is commonly asso- ciated positively with impartiality and justice, economists understand equality as an idealistic and unattainable goal often linked to socialism and communism. Interestingly enough, the connotation is different with respect to the negation of the terms (inequity and inequality): Less inequities but rather inequalities become political and economic focal points, and overcoming inequalities are taken as condition for equity. Thus, the terms are sometimes used simultaneously and interchangeably, with equity as the goal and inequalities as the impediment to be overcome. The terminological twins equity/equality, however, can be conceptualized in highly diverging ways with different consequences for development strategy. The discussions throughout the workshop mirror the controversial positions of international discourse on the topic. Equity and equality can point to varying dimensions; for example, with respect to outcome, opportunities, and capabilities. Each of these dimensions entails different responsibilities for political action. Whereas equality in outcome implies an egalitar- ian perspective, economic studies on inequality in outcome mostly take into account the results of actions and conditions such as unequal incomes. Equality of opportu-

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